Microwave Technologies – The next innovation in Financial World!
James Randi the famous magician and illusionist said – The New Age? It’s just the old age stuck in a microwave oven for fifteen seconds. Could you agree more to it?
The new financial world still uses the tact’s and methodology of old ages but now are wrapped and presented with glossy papers and equipped with newer technologies like microwave and millimeter technology providing trader that extra edge to stay competitive by saving your crucial nanoseconds and thereby reducing latency. A study has shown that using microwave communication could reduce the latency by up to 40 % when compared to fiber networks. Microwave technologies are already well settled in other sectors – be it Pharmaceuticals, Armed forces or Aeronautics and we are well aware of telecommunications sector which are the fore frontier runners in using Microwave technologies i.e WiMax technology.
What are microwave and millimeter technologies?
Microwave and millimeter refers to electromagnetic energy having frequency in the range of 1 GHz – 30 GHz and 30 GHz to 300 GHz respectively.
Microwave Technologies in Asia and India
The implementation of Microwave technologies in financial world in ASIA and specifically in India is still much on paper. The prime reason of it could be a simple fact that the market still does not have much veterans of HFT and with no demand there is obviously no supply. However, other sectors have picked up the microwave technologies and are reaping benefits from it. In Indonesia, a case study shows how the modern technology could make internet access available at a cheap rate aiding to economic growth of the country. In a report in Frost and Sullivan, they stated that China has maximum number of patents across globe filed against Millimeter technologies. The Airtel 4G is already in news these days, and shows how microwave technologies could be used in effective manner. 4G technology offering WiMAX [Worldwide Interoperability for Microwave Access] allows users to be in touch with the network for longer distances and greater speed. 4G technology offers high speed data transfer without any interference from any sources. Recently Indian Navy force announced about using the microwave technologies to build high power microwave weapons which could destroy enemy’s targets causing minimal collateral destruction. The Microwave technologies have also being adopted in long and short radar applications which are currently used by Defense and Aerospace sectors.
The New “Wireless” Financial Network across Globe
The very initial success of Chicago area-to-New Jersey microwave routes led the financial industry in Europe and US to trust microwave technologies as a friend. Firms across Europe like Optiver, Jump Trading, and Vigilant Global already have a dedicated proprietary network. In North America, efforts are underway to build connections between Toronto and trading centers in the United States. Another report by Insights Research for the year 2013 highlights an important fact that in coming years financial services would be spending around $1 trillion on telecommunication services and on various equipment needed to provide a secure network along with a sound business continuity plan in case of disasters or break-ups.
How To Set Up a Network Using Microwave Technologies
The transmission of microwave frequencies rely on tall towers [with that said, the taller, the better] which are used as relay sites by the network providers. To reduce latency and to achieve a straighter line on a map, fewer relay sites are deployed. The current trading platforms could use the microwave technologies in following ways –
1. One could build a dedicated proprietary network like Optiver, Jump Trading, and Vigilant Global
2. Taking aid of commercial shared services provider like McKay Brothers, leasing the bandwidth
3. Taking the aid of another trading firm, using the extra bandwidth that is left unused by them.
Receiving market data through wireless transmission could be attained by allowing dual packet transmission over the secondary wireless network. The implementation is quite simpler; one would need to lay a primary network and then fill the sequence gap with messages sent via secondary link ensuring the correct sequence and proper handling of the duplicate records.
To achieve Order Execution through a wireless network, one could adopt a bifurcated model that follows a simple principle that each server placed is independent and assumes that the other is working as expected.
The Road Ahead – Challenges and Future Prospects
Adoption has led us the way to jump cities, connect to global venues, making trading a global phenomenon. But, the technologists foresee some challenges –
• Lack of transparency in terms of ownership of the network, speed and latency
For example, McKay Brother’s states that between two data centers situated in Aurora and nearby Cermak, where futures are traded, the latency is 0.184 milliseconds if a trading firm server is installed on the 2nd floor. But it is 0.183 milliseconds if the server is on the 9th floor.
• Mapping of the network as a straight line gets difficult due to the curvature of the earth
India started its electronic trading in 2000 and next year we launched option trading, where globally the electronic trading and option trading were already at its peak. The delay has always caused us with some disadvantages , as when the world view us they do not find us equipped with modern technologies and that’s a drawback which keeps us pushing back in getting a status of global financial hub. The other sectors are already reaping benefits of microwave technologies in India and ASIA, the financial sector as well need to make some risk adverse decision and utilize the technology to provide great trading experience to the market participants and get placed globally. What say?